Video: Physical Counts
Let’s face it, the Quantity on Hand in a database is going to get out of sync with
actual product quantities. There are many ways this can happen, examples include
someone ships Item B when a customer ordered item A, now both items are incorrect in the database. Once your database and the physical items in your warehouse do not match the only option is to count your physical items and correct the database. Then the sales team knows what is on-hand to sell today.
Counts can be done in many ways and having a process to follow is important.
Periodic Counts: This is the best option if you are able to shut down production,
shipping and receiving then you can freeze the entire database and count the entire warehouse. This type of count will correct all discrepancies in the database and may only be required one to four times a year. The benefits are high since you will have accurate numbers to work off of for purchasing and selling products.
Cycle Counts: If you “cycle count” then you are only correcting a portion of the
discrepancies in the database. Cycle counts are valuable when performed in an over
consecutive days or at least once a week with the goal of counting the entire Count warehouse within a months time. Cycle counts only help slightly when performed once a month if your inventory turnover is high since you will not catch many issues.
Periodic or Cycle Counts: One of the biggest dangers with not shutting down for either type of count is that you can count and item and then someone else can receive or ship that item and now the quantity you counted is incorrect. The best option for this situation is to never post any receipts or invoices until the Physical count Register has been updated but even then you must require that once a user starts counting a row of bins that no one adds or removes items from that aisle of the warehouse.
Example: User 1 counts Item A which has a quantity of 10 on hand, now User 2 receives Item A for a quantity of 5, you should post the count of 10 then post the receipt of 5 and have a correct total of 15. You should not count 10, receive and post 5 so the database says you have 15 and post the count because doing so will remove the 5 and set the quantity on hand to equal the 10 that were counted.
Again, same but in shipping
Post shipping removes 1
Post Physical Count adds 1
Not you have 1 in the database and zero  physical items in the warehouse.